UK broadband subscriber growth continued to decline in Q4 2008 year-on-year. We expect declining growth throughout 2009, with the growth rate remaining positive, but in single figures
Vivendi’s Canal+ Group overshot its 2008 EBITA target, despite sluggish subscription growth, delivering to shareholders some of the promised post-merger gains from “synergies” with TPS
For 2009, Vivendi has issued cautious revenue and EBITA guidance that, on current trends, will easily be met. However, management has now recognised that initial targets for 2010 will be “hard to reach” – as we have already warned
In the medium term, a further downside risk for Canal+ Group is the likely loss of exclusivity for the distribution of themed channels, which could be the outcome of the anti-trust investigation of CanalSat, with a ruling expected in 2009
Project Canvas is the BBC/ITV/BT backed proposal for next generation Freeview and Freesat services that embraces IPTV reception, new EPG, home storage and HDTV applications
Setting up Canvas as a not-for-profit consortium and making it non-exclusive to content providers should avoid the competition issues which killed Kangaroo, but many questions remain and technical and regulatory delays could push back the launch to 2011
We do not expect Canvas to make a major difference to non-linear viewing of audiovisual content – its importance lies much more in future-proofing the ‘Free TV’ viewing experience on the terrestrial and satellite platforms
The essential conclusion of Ofcom’s Second Public Service Broadcasting Review is that the present commercial PSB model is unsustainable in the digital age. The Ofcom solution of fixing on Channel 4 as the “alternative, commercial PSB voice”, while freeing up the Channel 3 and 5 licensees from most of their PSB obligations, still leaves a major funding gap
A particularly attractive solution is some kind of synergy-generating merger/JV/partnership, but difficult to achieve in practice. The attached note examines the main issues that we may expect to arise with the existing proposals
Kangaroo – the proposed BBC Worldwide/ITV/Channel 4 video-on-demand (VOD) service – has been terminated by the Competition Commission (CC) due to fears that it could control the wholesale and retail supply of UK TV VOD
In our view the CC decision is a lucky escape for all three shareholders since it will save them from investing potentially tens of millions in an ill-advised venture which could have become a bottomless money pit when they can least afford it
Near term ITV and Channel 4 will refocus their internet strategies around their own portals and online syndication deals, but these are unlikely to deliver significant revenue; Marquee – the BBC’s proposition to open up iPlayer to other PSB broadcasters – could help, with the advantage of being very low cost
The final Ofcom statement on the future of PSB advocates fixing the commercial PSB crisis by designating Channel 4 as the core alternative provider of public service programming to the BBC, and freeing up ITV and Five commercially by means of considerably lightened PSB obligations
The fundamental issue of the Channel 4 (or any other) solution is funding the new commercial PSB model. Eyes are now being set on a Channel 4 partnership with BBC Worldwide, centred on its UK assets as the marriage made in heaven
Another major recommendation of the Ofcom PSB proposal is the abolition of the national Channel 3 breakfast time licence, currently held by GMTV, which is running a viable business with its own sales force. This recommendation appears at odds with Ofcom’s commitment to plurality in news provision and its statutory duties to encourage competition in the communications industries
Carphone Warehouse’s distribution business felt the recessionary chill for the first time in the December quarter, but its like-for-like organic growth of -1% was still far better than other consumer electronics retailers have fared
The market outlook is unfortunately still worsening. While we still expect Carphone Warehouse to outperform its competitors, its results are likely to get worse before they get better
In fixed line, net broadband additions were reasonable at TalkTalk but negative again at AOL. We are sceptical of the prospects for subscriber growth at AOL, and earlier guidance of 200-250k broadband net adds for the year to March now looks unlikely to be met
Ending a simmering commercial dispute, Vivendi’s Canal+ has agreed to distribute its packages to France Télécom’s Orange TV satellite customers, allowing Orange to relaunch its DTH platform (targeting 4 million customers off the DSL TV footprint) after its dismal ‘do-it-alone’ first six months
Canal+ recruitments will benefit from the resumption of active marketing for its packages over Orange TV platforms, after a poor year for subscriber growth
Canal+ catch-up TV will now be available to all Orange Canal+ DSL TV subscribers, as it is to those on Free, where it is very popular, plus Orange satellite subscribers, thus giving Orange back the leadership position on IPTV in France